Fundamentals of Statistics (5th Edition)
5th Edition
ISBN: 9780134508306
Author: Michael Sullivan III
Publisher: PEARSON
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Chapter 12.3, Problem 19AYU
CEO Performance (Refer to Problem 31 in Section 4.1) The following data represent the total compensation for 12 randomly selected chief executive officers (CEOs) and the company’s stock performance in 2013.
| Company | Compensation (millions of dollars) | Stock Return (%) |
| Navistar International | 14.53 | 75.43 |
| Aviv REIT | 4.09 | 64.01 |
| Groupon | 7.11 | 142.07 |
| Inland Real Estate | 1.05 | 32.72 |
| Equity Lifestyles Properties | 1.97 | 10.64 |
| Tootsie Roll Industries | 3.76 | 30.66 |
| Catamaran | 12.06 | 0.77 |
| Packaging Corp of America | 7.62 | 69.39 |
| Brunswick | 8.47 | 58.69 |
| LKQ | 4.04 | 55.93 |
| Abbott Laboratories | 20.87 | 24.28 |
| TreeHouse Foods | 6.63 | 32.21 |
Source: Data from Chicago Tribune, June 1, 2014
- a. Treating compensation as the explanatory variable, x, determine the estimates of β0 and β1.
- b. Assuming the residuals are
normally distributed , test whether a linear relation exists between compensation and stock return at the α = 0.05 level of significance. - c. Assuming the residuals are normally distributed, construct a 95% confidence interval for the slope of the true least-squares regression line.
- d. Based on your results to parts (b) and (c), would you recommend using the least-squares regression line to predict the stock return of a company based on the CEO’s compensation? Why? What would be a good estimate of the stock return based on the data in the table?
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Q.1.1 By completing the table below and then applying the relevant formulae, determine the line of best fit for this bivariate data set.
Do NOT change the units for the variables.
X
y
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Ex=
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EXY=
Q.1.2 Estimate the number of units of the good that would have been produced last month by an employee with 8 years of experience.
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Interpret your answer.
Q.1.4 Compute the coefficient of determination for the data set.
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Chapter 12 Solutions
Fundamentals of Statistics (5th Edition)
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